Summary Informal Finance and the Design of Microfinance Latest Verified Review 2023 Practice Questions and Answers for Exam Preparation, 100% Correct with Explanations, Highly Recommended, Download to Score A+

Informal Finance and the Design of Microfinance Latest Verified Review 2023 Practice Questions and Answers for Exam Preparation, 100% Correct with Explanations, Highly Recommended, Download to Score A+ Informal Finance and the Design of Microfinance Introduction Informal finance is defined as contracts or agreements conducted without reference or recourse to the legal system to exchange cash in the present for promises of cash in the future. In turn, microfinance is defined as formal schemes designed to improve the well-being of the poor through better access to saving services and loans. While both informal finance and microfinance serve poor, unbanked people, informal finance derives from the grassroots, bottom-up demand of the poor for appropriate financial services, whereas microfinance derives from donor-driven, top-down supply. The common wisdom is that informal finance is a mine of lessons to inform the design of microfinance (e.g., Ardener and Burman, 1995; Bouman 1995; Burkett, 1988; Caskey, 1994; Christen 1989; Graham 1992; Von Pischke 1992). In both rich and poor countries, work has looked at rotating savings and credit associations (RoSCAs), money-guards, hire/purchase stores, moneylenders, pawn shops, trade finance, checkcashing outlets, and loans among family and friends. This research has unearthed six basic virtues of informal finance: • Slashed transaction costs • Supply of not just loans but also savings and implicit insurance • Services sensitive to constraints faced by women • Substitution of confidence in character for physical collateral • Socially enforced and/or self-enforced contracts • Sequences of repeated transactions.